Economic Impact

The Biopharmaceutical Industry Helps Strengthen the U.S. Economy

A major contributor to the U.S. economy, the biopharmaceutical sector generates high-quality jobs and powers economic output for the U.S. economy, serving as the “the foundation upon which one of the United States’ most dynamic innovation and business ecosystems is built,” according to the Battelle Technology Partnership Practice.

These economic impacts are driven by the industry’s research and development (R&D) enterprise. The U.S. biopharmaceutical sector accounts for the single largest share of all U.S. business R&D, representing 23.4 percent of all domestic R&D funded by U.S. businesses in 2013, according to data from the National Science Foundation.

PhRMA members have invested more than half a trillion dollars in R&D since 2000, including an estimated $51.6 billion in 2013 alone. The impacts of this spending and the sector’s broad support for biomedical research ripple across the economy.

Creating jobs

The U.S. biopharmaceutical sector employs more than 810,000 workers and supports a total of 3.4 million jobs across the country.

The industry helps support a vibrant scientific and economic ecosystem that is vital to the U.S. economy and our country’s competitiveness in the global market. Biopharmaceutical companies put down roots in communities across the country, helping to generate jobs across a whole range of sectors, from suppliers to retail to personal services.

The jobs the industry creates have high wages and require a workforce with diverse skills and educational levels, from Ph.D. scientists to entry-level technicians, to support staff of all kinds. In 2011, the average annual total compensation for biopharmaceutical workers was $110,490, compared with $54,455 for all U.S. workers.

Overall economic contribution

As measured by Battelle, the overall economic impact of the biopharmaceutical sector on the U.S. economy totals about $790 billion on an annual basis when direct, indirect and induced effects are considered. This figure includes vendors and suppliers throughout the country that assist biopharmaceutical companies in the discovery, development and delivery of medicines for patients.

To provide insight into the breadth of the industry’s impact in the form of business relationships with vendors large and small, a recent analysis by We Work for Health aggregated data from 17 innovative companies across 17 states. The analysis found that in 2011, these biopharmaceutical companies spent approximately $53 billion in transactions with vendors and suppliers in these states.

Although just a snapshot of the sector’s total impact, these findings demonstrate the importance of a strong and vibrant biopharmaceutical industry in helping other businesses to grow and contribute to a strong local economy. Vendor data from this analysis, broken down by congressional and state legislative district, can be viewed on www.weworkforhealth.org.

Boosting State and Regional Economies

Biopharmaceutical companies collaborate with local research institutions across the country—including clinical research centers, university medical schools, hospitals, and foundations—to carry out clinical trials, providing patients access to potential new treatments as well as creating local jobs.

A PhRMA program called “Research in Your Backyard” helps to illustrate the impact trials have on communities around the country. Twenty state reports developed by the program have been released highlighting the biopharmaceutical economic impact on these communities through clinical trials.

More broadly, the biopharmaceutical industry and its extensive supply chain have a significant economic impact on jobs and economic output across the country. Research from the Battelle Technology Partnership Practice provides estimates of this economic impact for the U.S. and for selected states.

Increasing productivity

Another aspect of the economic impact of medicines is their potential to improve productivity in the workplace through reduced absenteeism or disability leave, which benefits both individual patients and the economy as a whole. Several of the most common chronic conditions are estimated to have a combined cost to the economy of more than $1 trillion annually in lost productivity. Examples of improved productivity include:

Rheumatoid Arthritis: Researchers at the Integrated Benefits Institute found that high cost sharing for rheumatoid arthritis medications decreased adherence and led to increased incidence and longer duration of short-term disability leave. Researchers estimated that when workers with arthritis take their medication as directed, their lost productivity drops by 26 percent.

Chronic Conditions: Research shows that workers diagnosed with diabetes, hypertension, dyslipidemia, asthma or chronic obstructive pulmonary disease who are adherent to prescribed medicines were absent up to seven fewer days from work and used five fewer days of short-term disability compared with non-adherent workers.